OIES Oil Monthly – Issue 2

The new issue of OIES Oil Monthly including our latest short-term oil market outlook is now available.

In this month’s featured In Focus piece, Michal Meidan argues that although China’s oil demand seemed off to a shaky start in 2021 with new COVID infections limiting travel during the New Lunar Year, solid economic momentum, new refining starts, and new storage tanks coming online, the Year of the Ox is looking strong. Yet unlike 2020, when buying patterns were overwhelmingly driven by storage, buying cycles in 2021 will increasingly depend on refining.

Greater optimism about demand in H2 2021, Saudi Arabia’s voluntary cut of 1 million b/d for the months of February and March, coupled with the drawdown of surplus stocks have led to sharp price rises in recent months lifting the base price. Our reference forecast for Brent in 2021 has now been upgraded to $60/b and remains unchanged at $63/b in 2022.  The balance of risks remains in negative territory reflecting concerns about the emergence of new COVID variants, the reimposition of mobility restrictions and the slow roll-out of vaccines, dampening demand growth prospects beyond Q1. However, the Brent prospect that takes into account the underlying uncertainty surrounding our outlook, has now converged towards the reference price, indicating that price risks are more broadly balanced and stands at $58/b in 2021 and $61.2/b in 2022. OPEC+ output policy and pandemic developments continue to dictate the market rebalancing in H1 2021, but recovery is still expected to gain pace from H2 onwards. We continue to project market deficits for both 2021 and 2022 by 1.1 mb/d.